Steel industry grapples with demand slump

Update:
May, 08/2014 - 09:14

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Ho Nghia Dung, Viet Nam Steel Association chairman

The recovery signals of international and domestic economies over the first few months of this year have yet to solve difficulties that the Vietnamese steel industry has encountered especially in finding outlets for products. The Vietnam News Agency spoke to Viet Nam Steel Association chairman Ho Nghia Dung on measures to accelerating the industry's development.

What are the major challenges facing the local steel industry?

Besides internal challenges, the steel industry has been influenced by the national economic issues that have resulted in a frozen real estate market and sluggish development of sectors using large volumes of steel such as infrastructure construction, machinery and engineering as well as shipbuilding. However, I think, the main bottleneck is a large imbalance between supply and demand.

How does a strong inflow of cheap and low quality Chinese steel products into Viet Nam influence the domestic steel sector?

I have to confess that this is happening not only in Viet Nam but in many other Southeast Asian countries. China is the world's largest steel manufacturer accounting for 48 per cent of the world's production. China is also faced with an imbalance between supply and demand in the domestic steel market. It is understandable then, that China switches to exporting steel to Southeast Asian countries including Viet Nam. In order to penetrate the region, Chinese exporters have reduced prices of their steel products to effectively compete with firms of these countries.

In Viet Nam, cheap steel imported from China has shown some trade frauds. The Viet Nam Steel Association and steel producers are joining hands with the relevant authorities to find a solution to deal with this problem.

Back to the story of Viet Nam's steel industry, I believe that prices of domestic steel products are competitive and not really expensive when compared with that of other countries thanks to efficient investment by domestic steel producers in modernising machinery and equipment.

Statistics from the South East Asia Iron and Steel Institute reveal that Viet Nam has the largest number of new steel projects in Southeast Asian region. So, is there a paradox that investors are still pouring capital into this cool steel market?

The fact is that preparations for large steel projects currently being developed started five or seven years earlier. At that time, the local steel market was running well with a yearly growth rate of 30 per cent. It was also a promising market for both international and domestic investors. However, the global economic crisis occurred and let down the steel market. This could not have been predicted by the investor and they had no choice but to continue with their projects.

However, the key issue here is that investors still recognise that these difficulties are temporary while there remain prospects for the steel sector in the long-term. In fact, Viet Nam's steel consumption per capita is still low compared with that of other nations, with some types of steel products still being imported.

What will the Viet Nam Steel Association do to deal with the sector's current difficulties?

Despite the present difficulty, there are many steel firms experiencing good performances thanks to their efforts towards enhancing capacity, improving product quality and production efficiencies.

I think, what many other steel manufacturers need to do is to reorganise the market, restructure production to improve product quality and sharpen their competitiveness.

In terms of the Viet Nam Steel Association, we had petitioned the Government to create a more favourable environment for steel producers by facilitating the development of real estate and construction and engineering sectors, which use large quantity of steel.

In the global economic integration context, it is also necessary for the State to find solutions to technical barriers related to increased protection for domestic producers, and to cope with trade frauds. — VNS